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Monday, July 19, 2010

By PEGGY FIKAC | AUSTIN BUREAU

July 18, 2010

AUSTIN -- Trying to carve billions of dollars from the state budget may seem tough enough, but the job will be even more challenging for lawmakers because of dollars they cannot easily touch.

When the current $182 billion, two-year state budget was written, $87 billion was labeled state general-revenue money. The rest was federal money and other dollars, such as the highway fund and bond proceeds, the uses of which are tightly specified.

"Well over half the state budget is essentially written before the Legislature has a chance to pull its own pen out," said budget expert Dale Craymer of the Texas Taxpayers and Research Association.

Even within the state general-revenue pot, all but about $17 billion was influenced or dedicated by the Texas Constitution, laws, regulations, court orders or funding formulas, according to the Legislative Budget Board.

Pressure building

When lawmakers writing the next budget grapple with a shortfall of up to $18 billion, the percentage of restricted money is expected to be about the same.

That does not mean lawmakers will not make cuts in restricted areas. Such cuts, however, could mean losing federal matching dollars that help fund key services — such as health care — or require additional legislation.

Nor does it mean they could eliminate everything funded with discretionary money.

The net effect is more pressure on programs whose funding has fewer strings, such as higher education.

"There will be a lot of pressure on higher ed, but ultimately, you cannot protect the same sacred cows that have been protected in years past and balance the budget through spending cuts," Craymer said.

Eva DeLuna Castro of the Center for Public Policy Priorities, which advocates for programs for lower-income people, said the budget board analysis is a reminder of the challenge facing lawmakers.

"It obviously means they can't find $18 billion in cuts. They are going to have to use the rainy day fund," she said.

The rainy day fund is expected to have about $8.2 billion next year. The Texas Constitution requires a super-majority vote of lawmakers to spend rainy day money.

Medicaid an issue

Senate Finance Committee Chairman Steve Ogden, R-Bryan, said he isn't concerned about the bulk of the restricted money because it goes to programs the Legislature would fund anyway and lawmakers can adjust funding levels.

"The only one that, at least in my mind, causes a lot of frustration is Medicaid because Medicaid is an entitlement, and we have no discretion. We pay whatever it costs," he said.

The federal health care reform law gives additional protection to Medicaid and the Children's Health Insurance Program. Lawmakers cannot restrict eligibility and must maintain certain services, although they can cut optional services, such as coverage for eyeglasses or hearing aids, said Stephanie Goodman of the Health and Human Services Commission.

Such cuts come at a cost. This year's human-services cuts of $205 million, including reimbursement-rate reductions, will cost an estimated $190 million in federal matching funds.